What a difference between Coin and Token in cryptography? Almost everyone confused a token with a piece (corner) at some point in his cryptocurrency journey. The point is that coin and token are fundamentally very similar. They both represent value and can process payments. You can also exchange coins against tokens and vice versa.
The main difference between these two comes down to utility. There are things you can do with tokens and not with coins. On the other hand, some marketplaces will accept coins and not tokens. In this article, Finance de Demain gives you the difference between a COIN and a Token. But before that, here are some Tips for Success in Entrepreneurship. Let's go !!
🌿 What to know about corners or coins?
Le COIN refers to any cryptocurrency that has a self-contained, independent blockchain, such as Bitcoin. These cryptocurrencies are bootstrapped from scratch and the larger network is designed explicitly to achieve a certain goal.
For example, Bitcoin exists as a censorship-resistant store of value and medium of exchange that has a fixed and secure monetary policy. Bitcoin's native token, BTC (i.e. bitcoins), is the most liquid cryptocurrency on the market and has both the highest market cap and realized market cap in the cryptocurrency industry.
Coin projects typically take inspiration from past technologies or other cryptocurrencies and merge them into an innovative network that serves a specific purpose. Another example Coin, Ether (ETH) is the native coin of a smart contract platform for creating general-purpose computer programs that run on a decentralized blockchain.
Rather than focusing on financial data, Ethereum focuses on arbitrary program data that can cover anything from games to social media. Ether is used to send/receive, manage assets, pay gas fees, and interact with decentralized applications (dApps) on the network.
⛳️ The characteristics of a Coin
A part is defined by the following characteristics:
1. Runs on its blockchain. A blockchain keeps track of all transactions involving its native cryptocurrency. When you pay someone with Ethereum, the receipt goes to the Ethereum blockchain. If the same person later reimburses you with Bitcoin, the receipt goes to the Bitcoin blockchain. Each transaction is protected by encryption and can be accessed by any member of the network.
2. Acts like money. Bitcoin was created with the sole purpose of replacing traditional currency. The paradoxical appeal of transparency and anonymity inspired the creation of other coins, including ETH, NEO, and Litecoin. You can purchase goods and services from many large companies today, such as Amazon, Microsoft, and Tesla, using cryptocurrencies. Bitcoin recently became an official currency of El Salvador alongside the US dollar.
3. Possibly mined. There are two ways you can earn cryptocurrencies. One is traditional mining on the proof-of-work system. The other method is Proof of Stake. It is a more modern approach to earning coins. It is lighter on energy consumption and easier to do. Cardano is one of the biggest coins that adopts this system.
🌿 What to know about Token or tokens?
A Token is a digital unit of value that represents an asset or utility. Unlike corners, tokens do not have their own blockchain. They are issued on existing networks. They cannot be mined during the transaction validation process. Instead, they are hit. The total number of tokens minted depends on different conditions set by the issuing project. Tokens can perform different functions. They can be used to raise funds or provide access to specific services. Some tokens can even represent coins on a different network.
These tokens are called “ wrapped tokens » and track the price of the underlying asset. Another very popular type of token is a stablecoin. It is a token that tracks the course of the US dollar.
⛳️ Types of tokens
Tokens can be classified into three types: security tokens, equity tokens and utility tokens. All of them can be issued to fund the development of the project. Let's see what are the characteristics and use cases of each type of token.
👉 Security Tokens
A security token is a tokenized digital form of a traditional security. Holders of security tokens have no ownership rights over the entity that issued the tokens. Instead, they may have other rights attached to them. The tokens are sold in a public offering called a security token offering (STO).
👉 Equity Tokens
Equity tokens are a subset of security tokens. They function like traditional stock assets and provide ownership to token holders. Holders are also entitled to a share of the company’s profits and voting rights on its major decisions. Equity tokens are issued through an Equity Token Offering (ETO) process.
👉 Utility Token
Utility tokens allow their holders to access a specific application or services of a blockchain-based project. Some utility tokens also offer discounts, rewards, or additional benefits to token holders. A true utility token usually has no expectation of profit. If it does not, it is a hybrid of a security and utility token. Utility tokens are usually issued through an initial coin offering (ICO).
👉 Payment Tokens
The sole purpose of payment tokens is to provide a means of payment. These tokens do not interact with blockchain-based applications in a unique way, unlike utility tokens.
Difference between Coin and Token
Okay, let's talk about the difference between Coin and Token. This is something that confuses a lot of people in the crypto world, but in reality, It's not that complicated. Coins are like the main currency of a country. Imagine Bitcoin, it's like the dollar of the crypto world. A coin has its own blockchain, its own network. It's independent, it does what it wants. Bitcoin, Ethereum, Litecoin, these are coins. They can be used to pay for stuff, transfer value, that kind of thing.
Tokens, on the other hand, are a different story. They are like chips in a casino, but digital. They live on someone else's blockchain. For example, many tokens use the Ethereum blockchain. They are created with smart contracts and often have more specific uses. You can have tokens that represent shares in a box, loyalty points, or even items in a video game.
The big difference is independence. A Coin, it does everything by itself. A Token, it needs someone else's blockchain to exist. It's like the difference between having your own house and renting an apartment. The Token, it pays rent in gas (transaction fees) to the blockchain that hosts it.
Another important thing: Coins are generally designed to be means of payment or stores of value. Tokens, on the other hand, can have all sorts of uses. Some give you voting rights in a DAO, others allow you to access specific services.
In terms of creation, launching a new Coin is like building a new road. It’s a big job, it requires a lot of resources. Creating a Token is more like opening a new store on an existing street. It’s simpler and less expensive.
In short, Coins and Tokens are a bit like comparing apples and oranges. They have some things in common, but they are not in the same league. The important thing is to understand what they are for and how they work before investing in them.
🌿 In summary
The difference between token and coin is not huge. But it can cause a major headache if overlooked often. A quick way to decide which one to use is to pay attention to what you are buying. If it is a product, most often, you would need coins. If it is a service, there are usually utility tokens that you can use. Interestingly, the way we spend tokens is quite similar to money. When you pay with cash, your money physically passes from your hand to someone else’s.
But we mentioned that only coins represent money and they don’t move at all. Is this a way for financial marketers to play with our mental health? It’s something to think about the next time you’re in a contemplative mood.